Minister of Finance rules out tariff protection for Chandra Asri

JAKARTA (JP): Minister of Finance Mar'ie Muhammad yesterday ruled out the possibility of issuing tariff protection for newly built industrial facilities, including the olefin project of PT Chandra Asri Petrochemical Center.

"All new industrial plants should comply with the existing tariff policy, without exception," the minister told newsmen in response to Chandra Asri's request on Wednesday for tariff protection.

Mar'ie said that maintaining the existing tariff formula is in line with the government's policy to gradually reduce import tariffs.

"The decisions were made by the President. I only announced them," the minister said, referring to the July deregulation package, which included the reduction of tariffs on a number of products.

"The existing tariff policy will be consistently implemented. It will not be changed," he reiterated his earlier statement about the possibility of raising import tariffs of certain petrochemical products in favor of Chandra Asri.

Peter Gontha, a director of Chandra Asri, said Wednesday the company needs the government's protection against imported products.

At a hearing with Commission VI of the House of Representatives, Peter asked the government to impose a duty of between 35 percent and 40 percent on imports of ethylene and propylene, two of the olefin products to be manufactured by Chandra Asri starting next year.

He said the protectionist measure is essential to enable the company to compete with imported goods.

Chandra Asri, which is currently building a US$1.7 billion petrochemical plant in Cilegon, West Java, is controlled by the Bimantara and Barito groups.

The olefin plant, the first in the country, will manufacture ethylene and propylene, the intermediate petrochemicals used to make polyethylene and polypropylene, the raw materials for the production of plastics, tires, synthetic fiber, pesticides, synthetic rubber, house wares and detergent.

Difference

State Minister of Investment Sanyoto Sastrowardoyo, expressed a different opinion from Mar'ie's over the need of granting special treatment to Chandra Asri.

"If we consider the prospect of the company, we have to support it," he told newsmen yesterday, commenting on Chandra Asri's protection request.

Sanyoto said Indonesia has an abundance of raw materials for the production of olefin products but it cannot process them due to the absence of the olefin plant.

"Most of the raw materials are exported and then we import them again in the form of semi-finished products," he said. "Are you willing to be like this all the time."

"Moreover, the company is committed to building its second plant with an additional investment of around US$1.4 billion," he said of the significance of the company's technological strength.

He agreed with Peter's view that imposing import tariffs on ethylene and propylene products would not hurt but instead encourage the downstream industry.

Minister of Industry Tunky Ariwibowo, when asked by reporters after meeting with President Soeharto yesterday, said that his ministry usually tells investors who plan to set up new industrial plants to follow the government's policy of gradually reducing import tariffs.

"But I cannot answer you now on whether we will protect Chandra Asri's operation because we will have to look at its cost structure before making any decision," he said.(hen/rid)